71 FR 68550, November 27, 2006
DEPARTMENT OF COMMERCE
International Trade Administration
[C-489-502]
Preliminary Results of Countervailing Duty Administrative Review:
Certain Welded Carbon Steel Standard Pipe From Turkey
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (``the Department'') is conducting
an administrative review of the countervailing duty (``CVD'') order on
certain welded carbon steel standard pipe from Turkey for the period
January 1, 2005, through December 31, 2005. We preliminarily find that
the net subsidy rate for the company under review is de minimis. See
the ``Preliminary Results of Review'' section of this notice, infra.
Interested parties are invited to comment on these preliminary results.
(See the ``Public Comment'' section, infra.)
[[Page 68551]]
EFFECTIVE DATE: November 27, 2006.
FOR FURTHER INFORMATION CONTACT: Kristen Johnson, AD/CVD Operations,
Office 3, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230; telephone: (202) 482-4793.
SUPPLEMENTARY INFORMATION:
Background
On March 7, 1986, the Department published in the Federal Register
the CVD order on certain welded carbon steel pipe and tube products
from Turkey. See Countervailing Duty Order: Certain Welded Carbon Steel
Pipe and Tube Products from Turkey, 51 FR 7984 (March 7, 1986). On
March 2, 2006, the Department published a notice of opportunity to
request an administrative review of this CVD order. See Antidumping or
Countervailing Duty Order, Finding, or Suspended Investigation;
Opportunity to Request Administrative Review, 71 FR 10642 (March 2,
2006). On March 23, 2006, we received a timely request for review from
the Borusan Group (``Borusan''), a Turkish producer and exporter of the
subject merchandise. On April 28, 2006, the Department initiated an
administrative review of the CVD order on certain welded carbon steel
standard pipe from Turkey, covering the period January 1, 2005, through
December 31, 2005. See Initiation of Antidumping and Countervailing
Duty Administrative Reviews, 71 FR 25145 (April 28, 2006).
On May 2, 2006, the Department issued a questionnaire to Borusan
and the Government of the Republic of Turkey (``the GOT''); we received
the GOT's questionnaire response on July 14, 2006, and Borusan's
response on July 17, 2006. On September 20, 2006, we issued
supplemental questionnaires to Borusan and the GOT. We received the
supplemental questionnaire response from Borusan and the GOT on October
4, 2006. On October 25, 2006, we issued a second supplemental
questionnaire to Borusan and received the company's response on October
31, 2006.
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters of the subject merchandise for which a review
was specifically requested. The only company subject to this review is
Borusan. During the period of review (``the POR''), Borusan was
comprised of Borusan Mannesmann Boru Sanayi ve Ticaret A.S. (``BMB'')
and Borusan Istikbal Ticaret T.A.S. (``Istikbal''). This review covers
11 programs.
Scope of the Order
The products covered by this order are certain welded carbon steel
pipe and tube with an outside diameter of 0.375 inch or more, but not
over 16 inches, of any wall thickness (pipe and tube) from Turkey.
These products are currently provided for under the Harmonized Tariff
Schedule of the United States (``HTSUS'') as item numbers 7306.30.10,
7306.30.50, and 7306.90.10. Although the HTSUS subheadings are provided
for convenience and customs purposes, the written description of the
merchandise is dispositive.
Period of Review
The period for which we are measuring subsidies is January 1, 2005,
through December 31, 2005.
Company History
As noted above, Borusan is composed of BMB and Istikbal. BMB was
previously known as Borusan Birlesik Boru Fabrikalari A.S. (``BBBF'').
On December 13, 2004, BBBF changed its name to BMB subsequent to its
merger with Mannesmann Boru Endustrisi T.A.S. (``MB'') on November 30,
2004.\1\ See Final Results of Countervailing Duty Administrative Review
Certain Welded Carbon Steel Standard Pipe from Turkey, 71 FR 43111
(July 31, 2006) (``2004 Pipe Final''), and accompanying Issues and
Decision Memorandum, at ``Calculation of Ad Valorem Rate'' under
``Subsidies Valuation Information'' (``2004 Pipe Memorandum'').
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\1\ As of November 30, 2004, MB ceased to exist as a separate
company. However, during the POR, MB filed its 2004 income tax
return for the period January 1, 2004, through November 30, 2004.
With regard to its 2004 income taxes, MB utilized the ``Deduction
from Taxable Income for Export Revenue'' program. For more
information, see ``Deduction from Taxable Income for Export
Revenue'' under ``Programs Preliminarily Determined To Be
Countervailable,'' infra.
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During the POR, BMB produced the subject merchandise, which was
first sold to Istikbal, an affiliated export sales company, and then
resold to unaffiliated customers in the United States. BMB's shares are
held by Borusan Mannesmann Boru Yatirim Holding A.S., a holding company
owned by Borusan Holding A.S.\2\ and Mannesmannrohren-Werke, A.G., a
publicly traded company in Germany. Istikbal is majority-owned by
Borusan Holding A.S.
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\2\ Borusan Holding A.S. is owned by the family of Asim
Kocabiyik, the company's founder.
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Subsidies Valuation Information
Benchmark Interest Rates
To determine whether government-provided loans under review
conferred a benefit, the Department uses, where possible, company-
specific interest rates for comparable commercial loans. See 19 CFR
351.505(a). Borusan provided the interest rates it paid on short-term
U.S. dollar (``US$'')-denominated commercial loans. We preliminarily
find that the company-specific US$-denominated short-term loans are
comparable to the export credit US$-denominated loans, provided by the
Export Credit Bank of Turkey (``Export Bank''), against which Borusan
paid interest during the POR. During the POR, Borusan, however, did not
pay interest against short-term Turkish Lira (``YTL'')-denominated
commercial loans, which are comparable to the maturity of the export
financing loans provided by the Export Bank.
Where no company-specific benchmark interest rates are available,
the Department's regulations direct us to use a national average
interest rate as the benchmark. See 19 CFR 351.505(a)(3)(ii). According
to the GOT, however, there is no official national average short-term
interest rate available.\3\ Therefore, we have calculated the benchmark
interest rate for short-term YTL-denominated loans based on short-term
interest rate data for 2005, as reported by The Economist.\4\
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\3\ See GOT's Questionnaire Response, at 20 (July 14, 2006).
\4\ In each issue, The Economist reports short-term interest
data on a percentage per annum basis for select countries.
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To calculate the benchmark, we sourced short-term interest rates to
represent quarterly rates for Turkey in 2005. Specifically, we sourced
the interest rate reported in the last weekly publication of The
Economist for each quarter of 2005, i.e., the March 26, 2005, June 25,
2005, September 24, 2005, and December 24, 2005 editions. We then
simple averaged those rates to calculate an annual short-term interest
rate for Turkey.\5\ We then compared the nominal average interest rate
with the interest rates that the company paid against the YTL-
denominated Foreign Trade Companies Short-Term Export Credits and Pre-
Export Credits. See Memorandum to the File concerning the Calculations
for the Preliminary Results of the 2005 Review of the Countervailing
Duty Order on Certain Welded Carbon Steel Standard Pipe from Turkey, at
2 (November 17, 2006).
[[Page 68552]]
This methodology is consistent with the Department's practice. See 2004
Pipe Memorandum, at ``Benchmark Interest Rates'' under ``Subsidies
Valuation Information'' and ``Comment 1: Benchmark Interest Rate for
Turkish Lira Loans.''
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\5\ The short-term TL interest rates sourced from The Economist
do not include commissions or fees paid to commercial banks, i.e.,
they are nominal rates. See Carbon and Certain Alloy Steel Wire Rod
from Turkey; Final Negative Countervailing Duty Determination, 67 FR
55815 (August 30, 2002) (``Wire Rod''), and accompanying Issues and
Decision Memorandum, at ``Benchmark Interest Rates'' (``Wire Rod
Memorandum'').
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Analysis of Programs
I. Programs Preliminarily Determined To Be Countervailable
A. Deduction From Taxable Income for Export Revenue
Addendum 4108 of Article 40 of the Income Tax Law allows companies
that operate internationally to claim, directly on their corporate
income tax returns, a tax deduction equal to 0.5 percent of the foreign
exchange revenue earned from exports and other international
activities.\6\ The income tax deduction for export earnings may either
be taken as a lump sum or be used to cover certain undocumented
expenses, which were incurred through international activities, that
would otherwise be non-deductible for tax purposes (e.g., expenses paid
in cash, such as for lodging, gasoline, and food).
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\6\ These actions include construction, repair, installation,
and transportation activities that occur abroad.
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Consistent with the 2004 Pipe Final, we preliminarily find that
this tax deduction is a countervailable subsidy. See 2004 Pipe
Memorandum, at ``Deduction from Taxable Income for Export Revenue''
under ``Programs Determined To Be Countervailable.'' The deduction
provides a financial contribution within the meaning of section
771(5)(D)(ii) of the Tariff Act of 1930, as amended (``the Act''),
because it represents revenue forgone by the GOT. The deduction
provides a benefit in the amount of the tax savings to the company
pursuant to section 771(5)(E) of the Act. It is specific under section
771(5A)(B) of the Act because its receipt is contingent upon export
performance. In this review, no new information or evidence of changed
circumstances has been submitted to warrant reconsideration of the
Department's prior findings.
During the review period, BMB, MB,\7\ and Istikbal filed separate
corporate income tax returns for tax year 2004. Each company utilized
the deduction for export earnings with respect to its 2004 income
taxes.
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\7\ See ``Company History'' section, supra, for MB's company
information.
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The Department typically treats a tax deduction as a recurring
benefit in accordance with 19 CFR 351.524(c)(1). To calculate the
countervailable subsidy rate for this program, we calculated the tax
savings realized by BMB, MB, and Istikbal in 2005, as a result of the
deduction for export earnings. We then divided that benefit by
Borusan's total export sales for 2005. On this basis, we preliminarily
determine the net countervailable subsidy for this program to be 0.21
percent ad valorem.
B. Foreign Trade Companies Short-Term Export Credits
The Foreign Trade Company (``FTC'') loan program was implemented to
assist large export trading companies with their export financing
needs. This program is specifically designed to benefit Foreign Trade
Corporate Companies (``FTCC'') and Sectoral Foreign Trade Companies
(``SFTC'').\8\ An FTCC is a company whose export performance was at
least US$75 million in the previous year. For eligible companies, the
Export Bank will provide short-term export credits based on their past
export performance. Under this credit program, the Export Bank extends
short-term export credits directly to exporters in Turkish Lira and
foreign currency (``FX''), up to 100 percent of the FOB export
commitment. The program's interest rates are set by the Export Bank and
the maturity of the loans is usually 180 days for YTL-denominated loans
and 360 days for FX-denominated loans. To qualify for a FTC loan, in
addition to submitting the necessary application documents, a company
must provide a bank letter of guarantee, equivalent to the loan's
principal and interest amount.
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\8\ An SFTC is a grouping of small- and medium-sized companies
that operate together in a similar sector.
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Istikbal, whose FTCC status was renewed in March 2005, was the only
Borusan company to receive FTC credits during the POR. Istikbal paid
interest against FTC loans denominated in Turkish Lira.
Consistent with previous determinations, we preliminarily find that
these loans confer a countervailable subsidy within the meaning of
section 771(5) of the Act. See, e.g., 2004 Pipe Memorandum at ``Foreign
Trade Companies Short-Term Export Credits'' under ``Programs Determined
To Be Countervailable.'' The loans constitute a financial contribution
in the form of a direct transfer of funds from the GOT, under section
771(5)(D)(i) of the Act. A benefit exists under section 771(5)(E)(ii)
of the Act in the amount of the difference between the payments of
interest that Istikbal made on its loans during the POR and the
payments the company would have made on comparable commercial loans.
The program is also specific in accordance with section 771(5A)(B) of
the Act because receipt of the loans is contingent upon export
performance. Further, the FTC loans are not tied to a particular export
destination. Therefore, we have treated this program as an untied
export loan program which renders it countervailable regardless of
whether the loans were used for exports to the United States. See id.
Pursuant to 19 CFR 351.505(a)(1), we have calculated the benefit as
the difference between the payments of interest that Istikbal made on
its FTC loans during the POR and the payments the company would have
made on comparable commercial loans.\9\ In accordance with section
771(6)(A) of the Act, we subtracted from the benefit amount the fees
which Istikbal paid to commercial banks for the required letters of
guarantee. We then divided the resulting benefit by Borusan's total
export value for 2005. On this basis, we preliminarily find that the
net countervailable subsidy for this program is 0.01 percent ad
valorem.
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\9\ See ``Benchmark Interest Rates,'' supra, (discussing the
benchmark rates used in these preliminary results).
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C. Pre-Export Credits
This program is similar to the FTC credit program described above;
however, companies classified as either FTC or SFTC are not eligible
for pre-export loans. Under the pre-export credit program, a company's
past export performance is considered in evaluating a company's
eligibility and establishing the company's credit limit. Like FTC
loans, the Export Bank directly extends to companies pre-export loans,
which are denominated in either Turkish Lira or foreign currency and
have a maximum maturity of 360 and 540 days, respectively.\10\ To
quality for a pre-export loan, in addition to submitting the necessary
application documents, a company must provide a bank letter of
guarantee, equivalent to the loan's principal and interest amount.
During the POR, BMB paid interest against pre-export loans that were
denominated in both Turkish Lira and U.S. dollars.
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\10\ The Export Bank also sets the interest rates for this
export loan program.
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Consistent with previous determinations, we preliminarily find that
these loans confer a countervailable subsidy within the meaning of
section 771(5) of the Act. See, e.g., 2004 Pipe Memorandum at ``Pre-
Export Credits'' under ``Programs Determined To Be Countervailable.''
The loans constitute a financial contribution in the form of a direct
transfer of funds from the GOT, under section 771(5)(D)(i) of the Act.
A
[[Page 68553]]
benefit exists under section 771(5)(E)(ii) of the Act in the amount of
the difference between the payments of interest that BMB made on its
loans during the POR and the payments the company would have made on
comparable commercial loans. The program is also specific in accordance
with section 771(5A)(B) of the Act because receipt of the loans is
contingent upon export performance.
Further, like the FTC loans, these loans are not tied to a
particular export destination. Therefore, we have treated this program
as an untied export loan program rendering it countervailable
regardless of whether the loans were used for exports to the United
States.
Pursuant to 19 CFR 351.505(a)(1), we have calculated the benefit as
the difference between the payments of interest that BMB made on its
pre-export loans during the POR and the payments the company would have
made on comparable commercial loans.\11\ In accordance with section
771(6)(A) of the Act, we subtracted from the benefit amount the fees
which BMB paid to commercial banks for the required letters of
guarantee. We then divided the resulting benefit by Borusan's total
export value for 2005. On this basis, we preliminarily find that the
net countervailable subsidy for this program is 0.01 percent ad
valorem.
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\11\ See ``Benchmark Interest Rates,'' supra (discussing the
benchmark rates used in these preliminary results).
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II. Program Preliminary Determined To Not Confer Countervailable
Benefits
A. Inward Processing Certificate Exemption Under the Inward Processing
Certificate (``IPC'') \12\ program, companies are exempt from paying
customs duties and value added taxes (``VAT'') on raw material imports
to be used in the production of exported goods. Companies may choose
whether to be exempted from the applicable duties and taxes or have
them refunded upon export. Under the exemption system, companies
provide a letter of guarantee that is returned to the companies upon
fulfillment of the committed export.
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\12\ The IPC program is governed by the following Turkish
provisions: Customs Code No. 4458 (Articles 80, 108, 111, 115, and
121), IPC Council of Ministers' Decree No. 2005/8391, and Communique
of IPR No. Export 2005/1.
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To participate in this program, a company must hold an IPC, which
lists the amount of raw materials to be imported and the amount of
product to be exported. There are two types of IPCs: A D-1 certificate
and D-3 certificate. During the POR, Borusan utilized D-1 certificates
associated with imports of raw materials for use in the production of
carbon steel pipe and tube. Borusan did not utilize any D-3
certificates during the POR.\13\
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\13\ For more information on D-3 certificates, see 2004 Pipe
Memorandum, at ``Inward Processing Certificate Exemption'' under
``Programs Determined To Not Confer Countervailable Benefits,'' and
GOT's Questionnaire Response, at 45-48 (July 14, 2006).
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An IPC specifies the maximum quantity of inputs that can be
imported under the program. Under the IPC program, the value of
imported inputs may not exceed the value of the exported products.
Input/output usage rates listed on an IPC are set by the GOT working in
conjunction with Turkey's Exporter Associations, which are quasi-
governmental organizations, whose leadership are subject to GOT
approval. The input/output usage rates vary by product and industry and
are determined using data from capacity reports submitted by companies
that apply for IPCs. The input/output usage rates are subject to
periodic review and verification by the GOT. The GOT uses the input/
output usage rates to ensure that a company's expected export
quantities are sufficient to cover the quantity of inputs imported
duty-free under the program.\14\
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\14\ For more information on how waste/usage rates are set by
the GOT, see 2004 Pipe Memorandum, at ``Inward Processing
Certificate Exemption'' under ``Programs Determined To Not Confer
Countervailable Benefits'' and GOT's Questionnaire Response, at
Exhibit 5, pages 10-11 (July 14, 2006).
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Pursuant to 19 CFR 351.519(a)(1)(ii), a benefit exists to the
extent that the exemption extends to inputs that are not consumed in
the production of the exported product, making normal allowances for
waste, or if the exemption covers charges other than imported charges
that are imposed on the input. In regard to the VAT exemption granted
under this program, pursuant to 19 CFR 351.517(a), in the case of the
exemption upon export of indirect taxes, a benefit exists to the extent
that the Department determines that the amount exempted exceeds the
amount levied with respect to the production and distribution of like
products when sold for domestic consumption.
In the 2004 Pipe Final, the Department found that, in accordance
with 19 CFR 351.519(a)(4)(i), the GOT has a system in place to confirm
which inputs are consumed in the production of the exported product and
in what amounts, and that the system is reasonable for the purposes
intended. See 2004 Pipe Memorandum, at ``Inward Processing Certificate
Exemption'' under ``Programs Determined To Not Confer Countervailable
Benefits.'' During the POR, under D-1 certificates, Borusan received
duty and VAT exemptions on certain imported inputs used in the
production of steel pipes and tubes and not duty or VAT refunds. There
is no evidence on the record of this review that indicates the amount
of exempted inputs imported under the program were excessive or that
Borusan used the imported inputs for any other product besides those
exported.
Therefore, consistent with the 2004 Pipe Final, we preliminarily
determine that the tax and duty exemptions, which Borusan received on
imported inputs under D-1 certificates of the IPC program, did not
confer countervailable benefits as Borusan consumed the imported inputs
in the production of the exported product, making normal allowance for
waste. We further preliminarily find that the VAT exemption did not
confer countervailable benefits on Borusan because the exemption does
not exceed the amount levied with respect to the production and
distribution of like products when sold for domestic consumption.
Further, because Borusan did not import any goods under a D-3
certificate during the POR, we preliminarily determine that this aspect
of the IPC program was not used.
III. Programs Preliminarily Determined To Not Be Used
We examined the following programs and preliminarily determine that
Borusan did not apply for or receive benefits under these programs
during the POR:
A. VAT Support Program (Incentive Premium on Domestically Obtained
Goods) \15\.
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\15\ Although we found this program to be terminated in Wire
Rod, residual payments for purchases made prior to the program's
termination were permitted. See Wire Rod Memorandum, at ``VAT
Support Program'' under ``Programs Determined To Be
Countervailable.''
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B. Pre-Shipment Export Credits.
C. Post-Shipment Export Loans.
D. Pre-Shipment Rediscount Loans.
E. Subsidized Turkish Lira Credit Facilities.
F. Subsidized Credit for Proportion of Fixed Expenditures.
G. Regional Subsidies.
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we have calculated a
subsidy rate for Borusan for the period January 1, 2005, through
December 31, 2005. We preliminarily determine that the total net
countervailable subsidy rate is 0.23 percent ad valorem, which
[[Page 68554]]
is de minimis, pursuant to 19 CFR 351.106(c).
The Department intends to issue assessment instructions to U.S.
Customs and Border Protection (``CBP'') 15 days after the date of
publication of the final results of this review. If the final results
remain the same as these preliminary results, the Department will
instruct CBP to liquidate without regard to countervailing duties all
shipments of subject merchandise produced by Borusan entered, or
withdrawn from warehouse, for consumption from January 1, 2005, through
December 31, 2005. The Department will also instruct CBP not to collect
cash deposits of estimated countervailing duties on all shipments of
the subject merchandise produced by Borusan, entered, or withdrawn from
warehouse, for consumption on or after the date of publication of the
final results of this review.
We will also instruct CBP to continue to collect cash deposits for
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit
rates that will be applied to companies covered by this order, but not
examined in this review, are those established in the most recently
completed administrative proceeding for each company. These rates shall
apply to all non-reviewed companies until a review of a company
assigned these rates is requested.
Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of the public
announcement of this notice. Pursuant to 19 CFR 351.309, interested
parties may submit written comments in response to these preliminary
results. Unless otherwise indicated by the Department, case briefs must
be submitted within 30 days after the date of publication of this
notice. Rebuttal briefs, limited to arguments raised in case briefs,
must be submitted no later than five days after the time limit for
filing case briefs, unless otherwise specified by the Department.
Parties who submit argument in this proceeding are requested to submit
with the argument: (1) A statement of the issues, and (2) a brief
summary of the argument. Parties submitting case and/or rebuttal briefs
are requested to provide the Department copies of the public version on
disk. Case and rebuttal briefs must be served on interested parties in
accordance with 19 CFR 351.303(f). Also, pursuant to 19 CFR 351.310,
within 30 days of the date of publication of this notice, interested
parties may request a public hearing on arguments to be raised in the
case and rebuttal briefs. Unless the Secretary specifies otherwise, the
hearing, if requested, will be held two days after the date for
submission of rebuttal briefs, that is, 37 days after the date of
publication of these preliminary results.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(ii), are due. See 19 CFR
351.305(b)(3). The Department will publish the final results of this
administrative review, including the results of its analysis of
arguments made in any case or rebuttal briefs.
This administrative review is issued and published in accordance
with section 751(a)(1), 777(i)(1) of the Act.
Dated: November 17, 2006.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
[FR Doc. E6-20008 Filed 11-24-06; 8:45 am]
BILLING CODE 3510-DS-P